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Footsie gains as traders eye possible interest rate cut

The FTSE 100 Index climbed 55.17 points while M&A talk involving AstraZeneca re-emerged
Markets warmed to speculation that the Bank of England would cut UK interest rates on Thursday

Stocks large and small built on gains on Monday amid speculation about a UK interest rate cut, while drug industry takeover talk swirled.

The FTSE 100 Index climbed 55.17 points to 6645.81 while the FTSE 250 jumped 408.64 points to 16586.39.

Meanwhile, the FTSE AIM 100 rose 43.2 points to 3410.02 and the FTSE AIM All-Share lifted 7.5 points to 713.06.

Markets warmed to speculation that the Bank of England would cut UK interest rates on Thursday.

Uncertainty around the issue of a new UK prime minister ebbed after Tory leadership contender Andrea Leadsom pulled out of the race, leaving the way clear for rival Theresa May.

But sterling was still lower, falling 0.05% to US$1.29 as the result of Britain’s EU referendum continued to take its toll on the currency, which has hit 31-year lows.

Shares in AstraZeneca PLC (LON:AZN) were down 34.5p at 4539.5p following rehashed speculation that it had its eye on US drug group Medivation Inc (NASDAQ:MDVN).

AstraZeneca is mulling a US$10bn bid for Medivation, which opened its books to potential bidders including US-based Pfizer Inc and France's Sanofi SA last week, the Sunday Times reported.

Rumours emerged in April that AstraZeneca was among a number of potential suitors for the San Francisco-based group, which is developing cancer treatments.

In small-cap world, Ortac Resources Limited (LON:OTC) soared nearly 35% to 0.04p as it said Slovakian authorities had rejected a legal challenge to a mining application.

Sound Energy PLC (LON:SOU) powered ahead by 14% to 27.5p as the Europe and Mediterranean-focused upstream gas company reported better-than-expected drilling results from its Tendrara licence area in Morocco.

Investors transformed Surface Transforms PLC’s (LON:SCE) share price by 8,7% to 18.75p after it did a technology development deal with an unidentified German performance car maker for its carbon fibre-reinforced ceramic brake discs.

News of a payment dispute hit shares in South Africa and Ghana-focused gold recovery service company Goldplat plc (LON:GDP) by 19.2% to 5.25p.

Flat first-half revenues and lower profits sparked a 3.4% fall in the shares of financial advisor Frenkel Topping Group PLC (LON:FEN) to 43p.

Back among blue chips, a riser was Glencore PLC (LON:GLEN) with a 5% gain to 175.7p, followed by other major miners.

Among the losers was Rolls-Royce Holdings PLC (LON:RR.), down 1.4% to 725p as it announced the €720mln acquisition of the outstanding 53.1% that it did not already own in Industria de Turbo Propulsores SA.

Preview at 6.59am

The FTSE 100 is set to open the week in positive territory with the resilience of the US economy, rather than the fall-out caused by Brexit, driving sentiment.

The spread betters are predicting the index of blue-chip shares will follow Friday’s near 60-point gain by posting an early rise of around 15 points to 6,605.94.

In Asia overnight it was all about general elections. In Japan, Premier Shinzo Abe won a landslide, making it easier, analysts said, for him to push through his economic reforms.

The equity markets greeted his re-election with a strong upward movement as the benchmark Nikkei 225 jumped 4.5%.

In Australia, the ASX powered ahead 1.8% after it emerged that Prime Minister Malcolm Turnbull’s coalition had won a very narrow victory in the polls.

Elsewhere, the mood was reasonably upbeat with the Hang Seng in Hong Kong adding 1.7% and the Shanghai Composite up 0.9%.

Friday’s non-farm payrolls surprised on the upside, which in normal circumstances would have investors fretting about a rise in US base rates.

But there’s nothing normal about the economic and political backdrop at the moment following the UK’s vote to depart the EU, which has traders a little fidgety.

That the world’s largest economy remains on track provided a welcome piece of good news.

“Asia markets took their cues from Friday’s US numbers as well as a decisive win by Japanese Prime Minister Shinzo Abe in upper house elections at the weekend, which some have hoped will make it much easier to implement new reforms and a stimulus package to revive the stuttering Japanese economy,” said Michael Hewson of CMC Markets.

Back in the UK, this week we have scheduled corporate news from fashion retailer ASOS plc (LON:ASC), pub chain JD Wetherspoon plc (LON:JDW) and comparison site Group PLC (LON:MONY).

*Brent crude oil is down 39 cents a barrel at US$46.37.

*Gold is trading US$12.10 higher at US$1,370 an ounce

*The pound is worth US$1.295.

*Bids & rumours: BGL, the owwner of CompareTheMarket and the French comparison website LesFurets, is preparing to hold a beauty parade of investment banks to handle an initial public offering tipped to value the company at up to £2bn.

City Pages

*The Bank of England will consider the first interest rate cut for more than seven years this week, as it seeks to contain the economic fallout from the Brexit vote – Guardian.

*Deutsche Börse is considering cutting the acceptance threshold for its merger with the London Stock Exchange Group in an effort to ensure the deal goes through – FT.

*Political uncertainty in Westminster is raising further doubts over a £1.3bn tidal power project in Swansea Bay even as backers of the scheme intensify efforts to win government approval – FT.

*The UK economy is already showing early signs of stress in the wake of the Brexit vote with a consumer spending and productivity slipping to multi-year lows last month – Telegraph.

*Security firm G4S has agreed a deal to sell its ATM service business to technology giant IBM as it offloads parts of the company to shore up its finances – Telegraph.

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